How Will the New Bonus Bill Impact Factory Workers' Pay from April 2014?

Press Trust of India | New Delhi, December 22, 2015

The Lok Sabha today passed a bill allowing the doubling of the wage ceiling for calculating bonuses to Rs. 7,000 per month for factory workers in establishments with 20 or more workers. The benefits are applicable retrospectively from April 2014.

The Payment of Bonus (Amendment) Bill, 2015

The bill was passed by a voice vote, with some members objecting to the raising of the eligibility limit for the payment of bonuses from a salary of Rs. 10,000 per month to Rs. 21,000.

Replying to a debate on the legislation, Labour Minister Bandaru Dattatreya said the Government has ensured that the interests of workers are protected and there is no infringement on their rights.

"Because of Bihar Elections, this bill got delayed... The Prime Minister spoke to me and asked why should the benefits of this Act accrue to workers from 2015. It should be made available from April 2014," he said while moving an official amendment to the Bill.

The official amendment provides that the benefits of the Act would be deemed to have come into force on April 1, 2014, instead of April 1, 2015.

Dattatreya said the Ministry has held 21 tripartite meetings with all central trade unions while arriving at a decision.

The Bill provides for enhancing the monthly bonus calculation ceiling to Rs. 7,000 per month from the existing Rs. 3,500. It also seeks to enhance the eligibility limit for the payment of bonuses from Rs. 10,000 per month to Rs. 21,000 per month.

"The Government's paramount intention is to safeguard the interests of workers... There is no infringement of workers' rights and whatever the government does will be in the interest of workers," Dattatreya said.

After the bill was passed, Deputy Speaker M. Thambidurai, who was in the Chair, said the government should be congratulated for bringing the measure as well as for effecting the benefits retrospectively.

Not sure how the companies pay the differential bonuses as most of the companies would have paid the bonuses for the year 2014-15 in the month of October 2015. It's going to be a tough task to work on financial books for the companies who wouldn't have provisioned such cost.

Regards, Keshav Reddy

Indeed, it is a welcome measure by the government to raise the wage ceiling for calculating bonuses. Once the bill becomes an act, we need to go through it to understand all the amendments. Effective from 1st April 2014, this change benefits employees, but employers will have to bear an additional financial burden as they have not accounted for the provision of bonuses (INR 7,000.00) in their books. Let's see how they react. Let's wait for the copy of the amended act.

As well said by Mr. Keshav Reddy, how is it possible to work out the bonus under the new amendment as the bonus for 2014-15 was already issued to the employees. However, I may need to understand that the amendment bill bonus working needs to be done separately, and the surplus amount would be disbursed along with the 2016 bonus payment.

Further, I would like to have comments on this matter.

Payment of bonus is warranted only if there is an available/allocable surplus or its carry forward from the previous year(s). Otherwise, only a minimum bonus is payable. So why should employers unduly worry about it? Of course, it widens the net and the absolute amount of bonus.

Good companies are already paying bonuses to all employees irrespective of salary drawn or the surplus.

Experts, please correct me here.

Hi Friends,

The Bonus Act amendment has been notified in the Gazette. It is effective from 1st April 2014. Therefore, all companies are required to pay incremental bonuses and provide additional benefits to employees covered by the new amendment.

Regards,
Keshav Reddy